Sporting goods retailer Big 5 Sporting Goods (NASDAQ:BGFV) shares have fallen (-60%) off their post-pandemic highs as benchmark indexes fell. The shares of the pandemic benefactor are starting to stage a rally despite losing some steam from the pent-up demand fueled reopening period.
The latest quarter was plagued with supply chain disruption and inflationary cost pressures. While same store sales fell (-12%) compared to Q4 2020, they still improved over the 2019 pre-pandemic period.
Athletic apparel and footwear and merchandise margins improved 437 basis points (bp) over the pre-pandemic period. Big 5 announced a new $25 million stock buyback program in addition to a $0.25 quarterly dividend on its earnings release.
Shares are selling at a bargain 6X earnings as short interest rose over 40% of its float as of Mar. 15, 2022. This sets up a potentially explosive short squeeze situation with a tiny 21 million share float.
Prudent investors seeking a bargain entry into the sport goods segment can watch for opportunistic pullbacks in shares of Big 5 Sporting Goods.
Q4 Fiscal 2021 Earnings Release
On Mar. 1, 2022, Big 5 released its fiscal fourth-quarter 2021 results for the quarter ending December 2021. The Company reported an earnings-per-share (EPS) profit of $0.89 beating estimates by $0.04. Revenues fell (-5.9%) year-over-year (YoY) to $273.40 million. It reported full-year fiscal 2021 EPS of $4.55.
The Company ended the year with $97.4 million in cash and cash equivalents and no debt while declaring a $0.25 quarterly cash dividend. Big 5 CEO Steven Miller commented,
"Our fourth quarter performance capped off a second consecutive record year of sales and earnings. In addition to strong top line sales, our 2021 results were driven by continued expansion of our merchandise margins, which reflected robust consumer demand, a constrained supply chain and a reduction in our promotions compared to pre-pandemic periods.
"With our strong earnings performance over the course of 2021, we enhanced our balance sheet while providing more than $69 million of capital back to shareholders through dividends and stock repurchases."
Conference Call Takeaways
CEO Steve Miller pointed out the Company returned over $69 million of capital to shareholders through dividends and stock buybacks. The Company has also announced a new $25 million stock buyback program. Same store sales rose 0.2% in Q4 2021 YoY, which was an increase of 10.6% versus pre-pandemic Q4 2019 levels. November was the softest month in Q4 due to unseasonably warm weather and supply chain disruption.
CEO Miller saw relative strength in apparel and footwear which saw double digit YoY gains. Hard goods were down low double digits. He noted that apparel and footwear was hardest hit during the pandemic while hard goods saw a 40% rise versus 2019 driven by pandemic demand for outdoor recreation and home gym products.
Merchandise margin rose 194 bp YoY and 437 bp compared to Q4 2019 pre-pandemic as merchandise expansion has been a key driver for the bottom line. The Company reduced print advertising, which has enabled more flexibility in pricing and purchasing while reducing advertising expense significantly.
Despite out performing 2019 pre-pandemic levels, same store sales were down (-12%) YoY to Q4 2020, when same store sales rose 31.8%. He concluded,
"As we look ahead towards March, we are facing very challenging comps against last year when sales benefited greatly as COVID restrictions eased, and there was a resumption of in-person schooling and sports leagues, along with the distribution of stimulus checks."
BGFV Opportunistic Pullback Levels
Using the rifle charts on the weekly and daily time frames provides a precision view of the landscape for BGFV stock. The weekly rifle chart broke down near the $25.44 Fibonacci (fib) level. The weekly rifle chart downtrend bottomed out at the $14.95 fib before staging a bounce. The weekly 5-period moving average (MA) is flat at $16.49 with 15-period MA at $17.77.
The weekly stochastic formed a mini pup attempt through the 20-band. The weekly market structure low (MSL) buy triggers on a breakout through $17.29. The daily rifle chart uptrend rejected at the 50-period MA at $17.56 as the 5-period MA stalls at $16.91 and 15-period MA at $16.50.
The daily stochastic fell back under the 80-band. The daily upper Bollinger® Band (BB) sits at $17.88 and lower BBs at $15.04.
Prudent investors can look for opportunistic pullback levels at the $16.45 fib, $15.50, $14.35 fib, $12.93 fib, $12.50, $11.21, and the $10.42 fib level. Upside trajectories range from the $20.52 fib level up towards the $26.44 fib level.